Xinhua Insight: China's exports beat forecast, surplus sets record

BEIJING, Aug. 8 (Xinhua) -- China's export volume was stronger than expected in July due to recovering external demand, with the monthly trade surplus hitting an all-time high, according to customs data published on Friday.

Last month, exports surged 14.5 percent from the previous year, reaching 212.9 billion U.S. dollars, while imports dropped 1.6 percent to 165.6 billion U.S. dollars, the General Administration of Customs (GAC) said in a statement.

The export growth rate more than doubled from the 7.2-percent rise seen in June. It's the fastest rate of growth in more than a year.

Trade surplus for July reached 47.3 billion U.S. dollars, soaring by around 170 percent from the previous year, up 50 percent from June, the data showed.

The monthly trade volume increased 6.9 percent year on year to 378.5 billion U.S. dollars.

Combined exports to the Eurozone, the United States and Japan expanded 13 percent year on year, up from 8 percent in June, according to a research note from Qu's team.

Imports dropped due to a high comparison base from a year earlier and declines in both import volumes and prices for commodities including copper, crude oil and refined oil products, Qu said.

"As domestic demand continues to improve, we expect import growth to improve modestly in the coming months," he said.

Hu Jiangyun, a researcher with the Development Research Center of the State Council, said that apart from weak commodities prices, the drop in imports could also be attributed to flagging domestic demand amid ongoing economic restructuring and industrial upgrading.

After years of galloping growth, China has become the world's largest goods trader, and room for further trade expansion has shrunk significantly, according to a report released by the Chinese Academy of Social Sciences.

China's goods trade in 2013 reached 4.16 trillion U.S. dollars, meaning the country overtook the United States for the first time to become the world's largest goods trading nation.

As a result, China's foreign trade will undergo a period of adjustment and adaptation to slower growth rates, the report predicted.

In the first seven months of 2014, the total trade volume edged up by 2 percent to 2.4 trillion U.S. dollars, with exports up 3 percent to 1.28 trillion U.S. dollars. Imports rose 1 percent to 1.12 trillion U.S. dollars.

The total trade surplus in the first seven months surged 20.9 percent from the same period last year, reaching 150.6 billion U.S. dollars, the GAC said.

Hu forecast that China's foreign trade will maintain a single-digit growth rate that is close to the country's GDP growth in the future, as the comeback of external demand is going to be slow.

The record-high trade surplus last month is commonly believed to be a driving force for appreciation in the exchange rate of China's currency: renminbi, or the yuan.

"If the central bank does not interfere with the foreign exchange market, pressure for the yuan to appreciate will further increase," according to Liu Ligang, chief Greater China economist at ANZ Banking Group.

The central parity rate of the yuan strengthened by 108 basis points to 6.1562 against the U.S. dollar on Friday, according to the China Foreign Exchange Trading System.

Liu said the yuan will continue its pace of appreciation in the future, as demand for the currency will increase with a pickup in China's economic growth.

That growth rebounded to 7.5 percent in the second quarter from 7.4 percent in the first quarter. First-half growth of 7.4 percent was in line with the government's full-year target of around 7.5 percent.

The latest sign of improving growth momentum came last week with the release of the purchasing managers' index for the manufacturing sector. It rose to a 27-month high of 51.7 points in July.

Before 2014, the GAC mainly used the U.S. dollar in its trade data releases. It started to use both the dollar and yuan to denominate all trade figures this year in an effort to promote expansion in use of yuan.

The growth rates in the yuan version were slightly different from the dollar version in a reflection of year-on-year change in the yuan-dollar exchange rate.

According to GAC figures in yuan, July's trade volume rose 6.4 percent, with exports up 14.1 percent and imports down 2.1 percent.